Unless strong economic support was provided by the governments of the various member countries in the European Union, Europe as a region will plunge into an economic downturn similar to the 2008 financial meltdown because of the economic fall out of the coronavirus, warned the president of the European Central Bank.
According to reports quoting source knowledge and information, this warning was given to EU leaders on Tuesday night by Christine Lagarde during a call made by her to urge the leaders to take concrete measures and increase government spending to counter the economic fall out of the coronavirus – which causes the disease Covid-19.
Europe would otherwise be at risk of a “scenario that will remind many of us of the 2008 Great Financial Crisis,” the eurozone’s central bank boss reportedly also said at the call. Reports claimed Lagarde as telling the EU leaders that the European Central Bank was considering all of its options before its meeting later in the week. Markets and analysts are widely expecting the ECB will cut interest rates and expand its quantitative easing programme, according to multiple reports.
Reports have said that the options being considered by the ECB include monetary stimulus tools aimed at providing “super-cheap” funding for banks while also making sure that the loans are made readily available top companies across the bloc as well as to make sure that the additional cash thus released is able to get circulated throughout the EU economy.
Reports also claimed Laragde warning the EU leaders that such measures taken by the ECB will be of any worth id they are completely backed up by spending by the various EU governments. EU leaders should ensure that the banks were efficiently giving out loans to businesses affected by the virus outbreak, she reportedly said and added that governments needed to ensure that they too ramp up spending and implement their own fiscal stimulus. If there was adequate response from the government, the economic fallout of the virus outbreak could ne temporary, Lagarde reportedly also said.
While commending the actions taken by some countries, the ECB president reportedly also urged countries and governments to do more. Leaders were increasing the risk of “the collapse of part of your economies” without any bold actions, she reportedly said, while stating that the economic damage of the virus outbreak was likely to spread to other countries.
There were no comments available on the issue form the ECB.
In response to the coronavirus threat, an emergency interest rate cut was announced by the Bank of England on Wednesday. A term funding scheme that could offer cheap loans worth more than £100bn to companies impacted by the virus which would include small and medium-sized businesses – the firms that are finding it most difficult to cope with the impact of the outbreak.
(Adapted from TheGuardian.com)